Japan January trade deficit on track to reach record- MOF

Reuters

TOKYO, Feb 7 (Reuters) - Japan is on track to post a recordtrade deficit in January, preliminary data showed on Friday, ina warning sign that consistently weak export demand could weighon economic growth. The data also provide further evidence that a weak yen isdoing more to push up import costs than it is to boost exportsas many Japanese manufacturers have shifted factories overseas. A record trade deficit would also suggest that overseasdemand may not be strong enough to offset the negative impact ofa scheduled sales tax increase in April. "It may be difficult to expect consumption to continue tolead growth as wages will not rise as fast as prices," saidNorio Miyagawa, senior economist at Mizuho Securities Research &Consulting Co. "If external demand doesn't pick up, the overall trend forgrowth would weaken." For the first 20 days of January, Japan's trade deficit was2 trillion yen ($19.6 billion), data from the finance ministryshowed on Friday. That would put it on track to surpass the current recordhigh deficit, which was 1.6 trillion yen in January 2013. Thefinance ministry will release trade data for all of January onFeb. 20. Exports rose 11.3 percent in the first 20 days of January,compared with the same period a year ago. Imports, however,jumped an annual 30.2 percent. The yen has fallen around 23 percent versus thedollar since late 2012 as Prime Minister Shinzo Abe's governmentembarked on a bold plan to end 15 years of deflation withexpanded quantitative easing from the Bank of Japan. The yen's decline has helped consumer prices rise as itpushes up import costs, which is contributing toward reachingthe Bank of Japan's 2 percent inflation target. Many in the government also expected the yen's fall to boostexports, but this has largely failed to materialise as Japanesecompanies are producing more goods outside of the country. Growing signs of weakness in emerging market countries hasalso raised concerns that demand for Japanese exports coulddeteriorate further. The economy is likely to boom until March as consumers rushto beat the sales tax hike, and many analysts agree with theBOJ's view that the pain from the higher tax will be temporary. However, weak exports could mean that the rebound is slowerthan some economists anticipate.